Here’s the good news: Section 119 of our beloved Internal Revenue Code allows your business to provide free meals and/or lodging to employees on a tax-free basis in limited circumstances.
“Tax-free” means no federal income tax for the employee and no federal payroll taxes withheld from the employee or owed by the employer (your business). Nice!
Your business can then deduct 50 percent of the cost of providing the free meals and the total cost of providing the free lodging.
Now for the bad news: the circumstances that allow tax-free treatment for free employer-provided meals and lodging are quite limited. But don’t give up hope.
Here are the basics you need to know in order to understand this issue.
Tax-Free Treatment Requires Passing Some Tests
For an employee of your business to be eligible for tax-free treatment for free meals and/or lodging, your business must pass the following tests.
Business Premises Test ... Log in to view full article.
